Correlation Between M Large and Pimco High

Can any of the company-specific risk be diversified away by investing in both M Large and Pimco High at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining M Large and Pimco High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between M Large Cap and Pimco High Yield, you can compare the effects of market volatilities on M Large and Pimco High and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in M Large with a short position of Pimco High. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Pimco High.

Diversification Opportunities for M Large and Pimco High

-0.42

Correlation Coefficient

M Large  Pimco High

Very good diversification

The 3 months correlation between MTCGX and Pimco is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Pimco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco High Yield and M Large is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on M Large Cap are associated (or correlated) with Pimco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco High Yield has no effect on the direction of M Large i.e., M Large and Pimco High go up and down completely randomly.

Pair Corralation between M Large and Pimco High

Assuming the 90 days horizon M Large Cap is expected to under-perform the Pimco High. In addition to that, M Large is 8.44 times more volatile than Pimco High Yield. It trades about -0.12 of its total potential returns per unit of risk. Pimco High Yield is currently generating about 0.07 per unit of volatility. If you would invest  837.00  in Pimco High Yield on December 25, 2024 and sell it today you would earn a total of  8.00  from holding Pimco High Yield or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

M Large Cap  vs.  Pimco High Yield

M Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days M Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pimco High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco High Yield are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco High is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with M Large and Pimco High

The main advantage of trading using opposite M Large and Pimco High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Large position performs unexpectedly, Pimco High can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pimco High will offset losses from the drop in Pimco High's long position.

The idea behind M Large Cap and Pimco High Yield pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.